Budget planning: Beginning at the end!

So your new boss has just asked you to develop next year’s departmental budget. Your immediate thoughts are “Oh no! My old boss used to do this for us! I’ve never had to develop a budget before…where do I begin?” Well, a good place to begin…is at the end. The end of last year, that is!

Here is an example of one way to develop your budget. Begin by gathering data on what your department spent last year and where that money went. You’ll also need to know some benchmarking data — including the number of open positions, candidate interviews, and placements made. Hopefully you’ve tracked expenses in a manner that allows you to determine exactly how much was spent and where. If not, I bet you will plan to do so for the coming year!

Many expenses within the physician recruitment department are fixed costs that don’t fluctuate based on the number of searches you have. However some expenses do fluctuate, which is why you will need to know how many searches and interviews were conducted and how many hires you had in order to project your budgeting needs.

Sourcing expenses

First, determine how much was spent for all candidate sourcing activities:

Databases (fees usually don’t vary based on the number of searches; these are typically fixed costs)

Online advertising

Print advertising

Mailings

Career fair expenses (exhibit fees, travel)

Other

Add up all of the variable expenses that were dependent upon how many searches you had and divide that total by the number of searches that were conducted. Use this number to help you determine how much more or less you will need to budget for next year based on whether you expect more or fewer searches.

For example, if you use a couple of multispecialty databases with fixed costs, those expenses won’t change whether you have 5 searches or 105 searches; however Internet job postings, mailings, and print ads will vary based on how many searches you have. If your total variable costs for sourcing tools were $10,000 and you had 18 searches for the year, your per-search cost would be $556 ($10,000/18). If you expect to have 20 searches next year, you’ll want to add another $1,100 ($556 x 2) to your budget for sourcing costs.

Take the expected change from last year’s variable expense total and add/subtract that to/from the total fixed costs to come up with the total needed for sourcing expenses for next year. Don’t forget to account for any scheduled increases in your database fees for the following year.

Candidate interview expenses

Interview expenses are probably the most variable expense your department will have and are completely dependent upon the number of searches. Add up costs for hotel, travel, food, car rentals, welcome gifts, etc., for all of the interviews conducted for the year.

Take the total interview expenses and divide that by the number of interviews conducted to get your per-interview cost. If you had 57 candidate interviews over the year and spent a total of $68,400, then your per-interview cost average is $1,200.

You then need to calculate how many interviews you typically conduct per search. Take the total number of interviews conducted and divide by the total number of searches conducted to determine your “average number of interviews per search.” According to the 2012 ASPR In-House Physician Recruitment Benchmarking Survey, a typical search had two interviews. Let’s say, for example, your data indicate that you had an average of 3 interviews per search (57 interviews/18 searches = 3.2). It’s likely that some searches had more than three (you know which ones they were!) and some likely had less (luckily for your sanity). Overall, you can anticipate your organization will need to budget for three interviews per search for the following year.

If you’re expecting 20 searches next year, you should budget for $72,000 (20 searches x 3 interviews = 60 interviews; $1,200 per interview x 60 interviews = $72,000). Make sure you plan for the unexpected! You probably know of certain searches that will definitely be on your “to do list” for the year, but new searches always seem to pop up unexpectedly throughout the year due to unanticipated departures or needs that arise. Account for these in your budget estimates.

If you pay for a house-hunting trip for physicians once they have signed their contracts, make sure to include your anticipated expenses for those trips, as well.

Background check expenses

Your department may or may not do background checks. In some organizations, the credentialing office will cover this expense. If you are responsible for this, take a look at what your fees were and how many were conducted last year. Adjust the expected amount based on your expected number of searches or hires (depending on the phase when you conduct the background check).

Professional education expenses

Hopefully your organization assists with your ASPR professional membership dues and supports your attendance at the ASPR annual conference. Plan for $250 for your annual ASPR dues and approximately $2,500 for annual conference expenses ($975 for the registration fees for the annual conference and one fellowship module, $500 for flight, $800 for 4 nights of hotel, and $200+ for food and other expenses).

Marketing tool expenses

Everyone needs some marketing tools to help promote their organization and open positions. These are typically not annual expenses (thankfully, since they tend to be expensive), but marketing tools do need to be updated from time to time. That rickety display and frayed tablecloth you’ve been dragging around from state to state may have seen its last career fair! Make sure your tools are up to date, branded appropriately, and positively reflect your organization and community.

Take a look at your inventory. Does anything need to be newly created or updated? Do you need to refresh your supplies of printed materials? Review all of your tools including your physician recruitment-specific website, video, brochures, exhibit materials (display, tablecloth, giveaways, etc.).

Costs for these tools can be highly variable. In order to appropriately budget for them, you will need to do some research and likely request some proposals from your marketing department (if you’re lucky enough to have one) or from outside vendors.

Recruitment firm placement fee and locum tenens expenses

Many in-house physician recruitment programs, regardless of how fantastic their physician recruiter is, may still need to rely on assistance from outside recruitment firms for difficult-to-fill positions from time to time. Make sure you budget for recruitment firm placement fees. These fees will vary depending on the company, but you likely have some contracts in place so you can estimate how much you can expect to pay per placement. You also should know your history with placement fees and how frequently you’ve needed this type of assistance in the past. Use this information to estimate how many placements you should expect for the coming year.

If your department is responsible for locum tenens fees, make sure to include those expenses as well based on the previous year’s data and anticipated needs. Many organizations charge locum tenens fees back to the hiring department, so this may not be something you need to worry about from a budgeting standpoint.

Physician incentives and welcome gift expenses

Again, physician incentive programs may or may not fall within the physician recruitment department’s budget. If they do fall in your realm, make sure to include monies for any programs that you offer — such as relocation assistance, sign-on bonuses, loan assistance programs, stipends, and any other creative programs your organization utilizes to help make your packages more attractive.

Most organizations have a relocation policy that will help to determine how much to set aside for that incentive program. You will also need to know how many hires you anticipate. Again, you can use last year’s hire numbers and your anticipated number of searches and hires to determine how much you’ll need. Some surveys indicate that the average relocation allowance is $15,000. Your organization may offer more or less as a standard or determine it on a case-by-case basis depending on the physician’s current location and circumstances.

Don’t forget to budget for the new physician welcome gifts! Most organizations do something to welcome their newly recruited physicians to their organization and community. Whether it’s a welcome basket full of goodies, sampling of gift certificates to local restaurants and shops, or something more creative, make sure you budget for these gifts. Make sure you keep track of what you spend on each physician in order to comply with the Stark Law (keeping physician gifts under $300 plus the CPI-U annual threshold).

Revenue

Revenue? From the physician recruitment department? Yes, sometimes there is! There is the revenue that all of those physicians you’ve recruited bring in to the organization, but that is not the type of revenue we’re talking about. If your organization offers physician recruitment services to private practices within your service area and charges for those services in order to cover the organization with respect to the Stark Law, your department can generate revenue. According to the 2012 ASPR In-House Physician Recruitment Benchmarking Report, approximately 9% of participating organizations do offer and charge for physician recruitment services. The report indicates that 25% of organizations charge less than $5,000, 17% charge $10,000 to $14,999, 33% charge $15,000 to $19,999, and 25% reported that their fee varies. If your department does charge for these services, make sure you include that revenue in your budget.

Planning ahead

If you’ve struggled with collecting data from last year in order to develop estimates for next year, you should develop a plan now to gather benchmarking data for the coming year. As you can see, collecting benchmarking data is not only important for completing the ASPR In-House Physician Recruitment Benchmarking Survey—it’s critical in order for you to plan appropriately.

The following items should be tracked throughout the year in order to budget appropriately:

Number of CVs obtained and from what sources.

Number of interviews that were conducted.

Number of offers were that were extended.

Number of hires that were made.

Amount of money spent and where.

There are a variety of tools that you can use to collect benchmarking data, the simplest being a basic Excel spreadsheet. Several vendors offer products that can provide a multitude of bells and whistles to help benchmark, generate reports, and automate steps within the recruitment and onboarding cycle.

However you decide to track your data, you will be very happy that you planned ahead—and, so will your new boss!